Social and Behavioral Sciences Commons^™

Risk And Marketing Behavior: Pricing Fed Cattle On A Grid, Scott Fausti, Zhiguang Wang, Beshir Qasmi, Matthew A. Diersen

Economics Staff Paper Series

A seven year comparative study of grid pricing versus average pricing of slaughter cattle was conducted to evaluate carcass quality market signals. The primary objective of the study is to determine if market signals sent through the grid pricing system are encouraging producers to market on a grid and discouraging them to market by the pen. Two secondary objectives investigate: 1) if price risk associated with carcass quality uncertainty affects marketing decisions, and 2) if a change in price risk (volatility) affects producer marketing decisions. An EARCH-ln-Mean modeling procedure was adopted. Empirical results suggest that the grid premium and discount …